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At the beginning of 2008, we predicted a drop to S & P 1000 and a fall of 33% on the stock market into the first few weeks of October. The market eventually fell 46% and the downside is not complete. Let's look at an overview of the stock market into next year before we look at other best trades. We will also discuss trades setting up in the remainder of 2008 that may extend into 2009.

STOCK MARKET: Near term, we will focus on S & P 815 into Nov. 17 or 21 at the latest, then a rally back to 995 or lower into Thanksgiving or Dec. 5, and then a move down to 730 into Dec. 15. Part of the pressure during this period will come from the aftermath of a major 42-cycle that peaked on Nov. 4. This cycle marked the end of the 1949-1966 bull market, with the DOW reaching 1000 two weeks before the equivalent date on Feb. 24, 1966. Stocks continued lower from that high for the next eight months, dropping to DOW 774 for a 26% decline. We may see 650 by the late-February cycle low.

The 120-year cycle analogue suggests a low into the first week of December, and we would extend it to Dec. 14 based on minor cycles. The best upcoming rally is likely to be Dec. 15, 2008-early Feb. 2009. After Dec. 15, we have a number of significant lows into late Feb. 2009 and thereafter to consider. A false-optimism cycle in 2009 will at times make it look like that the U.S. stock market is recovering but like all bear markets, you tend to get retest lows and lower lows. An investment bottom may not form until Oct. 2009 but could be earlier.

The general economic recession (if we are lucky to just get away with that) will easily affect us into at least into Oct. 2009. With over 115 banks on the FDIC watch list, I suspect losses and mergers will accelerate in 2009. This climate suggests bear market basing and failed bear market rallies. We doubt that the troubles in Europe and eventually Asia will go away that quickly. Global intervention is working at the moment but will it loosen bank lending? The U.S. bailout plan may take 5-6 months to have an effect--it's like turning a large ocean liner.

The media will be all over declaring a bottom by the January high but there is always at least a one new low and a retest low thereafter. We do have new lows into Feb. 2009 and probably early April 2009 as well as Oct. 2009. Usually stocks bottom before all the numbers turn in a recession around but we still can wait for a series of lows before a bottom will form and then in 2010 stocks will recover into 2011, with the dollar topping into Feb. 2011.

For now we would not go back into stocks unless the S & P takes out 1270, and I doubt we will see that as 2009 looks to be a sideways to lower year into October. Recessions tend to grind markets and it will take until late 2009 before we see signs that corrective measures are working. Unemployment may easily hit 8.5%-9% but we should not be throwing out comparisons to the Great Depression for 2009. Still, the housing crisis and higher crude are likely to prevent much upward action next year--and by the end of 2009 we may see a 55-60% or more drop in the stock market, much like we saw in 1973-4.

What does all this mean in terms of individual markets? Here are some of the highlights we foresee.

BEST TRADES OF 2009

HEATING OIL: Corn was our #1 trade for 2008 and heating oil is #1 one trade for 2009. This market is very oversold and the Farmer's Almanac projects an abnormally cold winter and heating oil supplies are generally tight. Once cold weather starts hitting in the Northeast by about Thanksgiving, the trade will start driving up heating oil. Our last cycle low in the crude complex is Nov. 21 or possibly into Dec. 5 at the latest. We had been projecting 173 for a while and max. 150 if crude falls to $50-52. Upward target is 254 but a move to 300 is possible. Some cycle highs are not due until the week of April 10 so it could be that the market will hold up beyond seasonal norms in late January.

STOCK INDICES: There will be multiple swing longs to play on the S & P in 2009. It appears there could be three major swing lows into Dec. 15, with the final one reaching lower to about 730. The major swing buy is Dec. 15- to late February, which should be 264 S & P points from the estimated 730 low, and then another great short from early February into late February or mid-March that could even go to 650. That may be the lowest point of the year but it will probably be retested a few times in 2009.

U.S. DOLLAR: The trend is up in the US dollar into Feb. 2011. The first wave higher looks to be complete at 9242, probably into early December, and then we are look at some kind of 3-wave decline into the week of Jan. 23. The third wave high should be 2111 points from the pullback, and that 3-wave decline may not be complete until April 2009 so that will be something to play. Computer models on the monthly chart project 103.64 for the top of the 3rd wave so the 4th wave may hold the 8000-8100 region.

JAPANESE YEN: Computer models are projecting 1.2050 and the most important cycle high is due the week of Dec. 26 with April looking like a cycle low. We currently do not know how long it will take the yen to go to 1.2050 but it could happen as soon as late December 2008. Best entry may be Nov. 20 so stay in touch with our daily service to fine-tune dates and entries.

GOLD: Still seeing 665 or max. 638-646 on gold to the downside and we found a new cycle low as late as Nov. 21 and then should rally into the week of Feb. 6 and then decline into April. The big question is whether the market we just get a 3-wave rally up into February that stays below 1000 and opens a move to 550 into April 2009 or whether a new high to 1120 develops into February. In either case, buying the 640-660 region at the latest into Nov. 21 will be important for a longer trade.

For the past 21 years, Barry Rosen has been in the business of advising clients on market timing using modern adaptations to certain ancient cycles. His company Fortucast Market Timing Inc. publishes daily and intraday reports on over 20 futures markets, and mutual fund indices/ETFs using Gann, Elliott wave and five cyclical models. Barry recently predicted the July 15 low on the S & P to the day, hitting the price within .75 ticks--and in fact has been forecasting a major break in the stock market of about 33% since January. Earlier this month he was interviewed by CNBC. Timer Digest ranked the Fortucast Alternative Investment Newsletter 6th in long-term timers over the years and 5th for Top Ten Timers between March 2007 and March 2008.

Mr. Rosen is registered with the NFA and the CFTC as a Commodity Trading Advisor (CTA). Fortucast uses proprietary cyclical timing models to filter out false indicators. His opinions on the markets are his own and do not necessarily represent the view of FutureSource. For more information about Mr. Rosen or his company, please visit his company's website: www.fortucast.com.

Sign up to get Barry Rosen's 2009 Market Outlook, including long-term trends and best trades of the year, for 14 financial markets as they set up. You will also receive information on how to get other complimentary reports from this author, including his coverage of agricultural markets and mutual funds/ETFs. Don't miss out, get the complimentary report today.